Northern pursuit
After building new bases in Beijing, China Southern, China Eastern plan further expansion, posing competition for rival Air China
China’s three biggest airlines – Air China, China Eastern Airlines and China Southern Airlines – have long dominated air traffic in their regional headquarters of Beijing, Shanghai, and Guangzhou, capital of South China’s Guangdong Province.
But now, a new airport in Beijing’s southern Daxing district is about to break the balance, as the Shanghai and Guangzhou “landlords” are seeking to expand their turfs in the national capital, competing head-to-head with Beijing-based Air China.
On Tuesday, China Southern unveiled a new travel base at the soon-to-be-opened airport in Daxing.
The new mega airport, scheduled to open in 2019, is being built to divert traffic from the overly saturated Beijing Capital International Airport (BCIA) in northern Beijing and has also been designated as the hub for members of the SkyTeam alliance, a group of global airlines that includes China Eastern and China Southern.
The two carriers will each manage 40 percent of the new airport’s traffic flows, according to a statement on the website of the Civil Aviation Administration of China (CAAC), and will be relocated to southern Beijing when the new airport begins operation.
Meanwhile, Air China will stay at the existing airport in the capital’s north.
Following its groundbreaking move Tuesday, China Southern said that it will now oversee three project phases to help with meeting its operation aims at the new airport in Daxing.
The first phase, from now until 2019, will see the company move all its business projects from BCIA to the new airport. The second phase, from 2019 until 2025, will entail the building of domestic and overseas networks at the new airport.
And the third phase from 2026 to 2030 will involve the rapid expansion of the airline’s networks and frequencies.
By 2025, the end of the second phase, the carrier said it expects to have inputted 250 aircraft, 20,000 employees and 900 daily flights at the airport in Daxing.
As for its long-term development goal, the airline has also carved out a “double-hub” strategy, aiming to make Beijing its second major center after Guangzhou.
Thus far, the company has inputted 70 aircraft, including five jumbo jet A380s, and has opened 52 domestic and international routes at the existing airport.
In fact, a new base in Beijing is very critical for China Southern’s ambitions in the foreign and overall domestic markets, said industry experts.
Particularly, the capital’s strategic geographic location is likely to enable the Guangzhou-based carrier to tap into markets in China’s northeastern and northwestern regions.
In terms of overseas routes, its presence in Beijing may not only enable the carrier to strengthen its long-term advantage regarding flights to Australia and Southeast Asia, but also make up for shortcomings in long-haul cross-continental flights to the US and European cities, elevating its competitiveness.
In June, another anchor operator at BCIA, China Eastern, also started the construction of a 13.2 billion yuan ($2 billion) aviation facility project at the new mega airport, according to media reports.
The project, covering 1.17 million square meters, includes facilities for cargo services, flight maintenance, catering preparation and passenger services.
The carrier said it plans to deploy 150 to 200 planes and 20,000 employees to the base.
Similar to China Southern, China Eastern also positioned its travel base in Beijing’s new airport as its second headquarters after Shanghai.
The carrier plans to launch new international flights that depart from Beijing after the new airport is put into operation, and compared with its current US-bound flights departing from Shanghai, the new ones from Beijing will save about an hour’s travel time for passengers.
Competing head-to-head
With Beijing-based Air China currently holding absolute privilege of flight slots, international air traffic rights and land as well as asset resources at BCIA, industry insiders say that the use of the new airport is a “gamechanger” for China Eastern and China Southern.
According to data published by industry website feichangzhun.com on Tuesday, Air China leads passenger capacity at BCIA – which handled 94 million passengers overall in 2016 – with a market share of 38.12 percent, while that of China Southern and China Eastern stood at 12.46 percent and 11.22 percent, respectively.
Its dominating capacity allows Air China to be the largest Chinese carrier of flights to the US and Europe, especially as China Eastern currently does not have any direct long-haul services out of Beijing, data from UK-based industry website FlightGlobal shows.
However, the new airport, which is estimated to manage a capacity of 72 million passengers a year in its initial stage, will help China Southern and China Eastern acquire coveted time slots of lucrative flight routes to the US and Europe, posing strong competition for Air China.
Bumpy road ahead?
On the other hand, the two carriers’ invasion of Air China’s backyard may prove to be a bumpy road in the short term.
One difficulty stems from the new airport’s location, which is about 48 kilometers away from downtown Beijing compared with the 20 kilometers, or 25 minute drive, from downtown Beijing up to BCIA, which could pose a harsh disadvantage for the new airport.
Moreover, the Airport Express subway line and buses have been linking Beijing central with BCIA for years, allowing easy access for passengers, something the new airport may lack in its first few years of operation.
A guideline issued by CAAC in August also casted shadows of doubt. Under the guidelines, from 2019 to 2025, carriers that operate similar international routes as one another, except those to the US, Singapore and Australia, should not do so at a rate that exceeds 15 percent.
Against the backdrop of Air China’s extensive global network, the new rule could mean that its two main rivals may only gain access to international flights that Air China “abandoned” or generates fewer profits from.